The European Commission has dismissed a French call for a cut in EU funding to countries such as Ireland with low corporate tax rates.

A Commission spokesman said he could not see how the EU could tie its structural funds, which make up a third of the Union's budget, to a country's corporate tax rate.

"Tax policy is largely discretionary and subject to unanimity. Creating a link with the structural fund is a fairly tricky issue and it is difficult to see how one could make that sort of link," he said.

The French finance minister, Mr Nicolas Sarkozy, said in a television interview on Sunday evening that new member-states with lower corporate tax rates than the EU average should not be eligible for structural funds.

"One can't allow in Europe that some countries say, 'we're sufficiently rich to lower our taxes' - to as low as zero in some cases - but at the same time ask the countries of old Europe to pay structural funds that we could use for our regions," he said.

EU finance ministers meeting in The Hague later this week will discuss a proposal to introduce a minimum corporate tax rate throughout Europe.

A Government source said that the proposal was "unlikely to find favour" with the outgoing Minister for Finance and incoming Irish EU Commissioner, Mr McCreevy.

France and Germany, which charge corporate tax of between 35 and 40 per cent, fear that companies could move their investment to EU member-states with lower rates.

Estonia has a 0 per cent rate for reinvested earnings while Latvia, Lithuania and Cyprus charge 15 per cent and Poland charges 19 per cent. Ireland's corporate tax rate is 12.5 per cent.

Despite its support for tax harmonisation, Germany yesterday rejected Mr Sarkozy's proposal to cut structural funds to low-tax countries.

A spokesman for the Internal Market and Taxation Commissioner, Mr Frits Bolkestein, said tax rates remained a sovereign decision for member-states.

"If a country feels that it needs to compensate for other handicaps it may have in order to attract investment by having a lower rate of company tax, that is a matter of national sovereignty and up to each member state," he said.

Mr Sarkozy's suggestion met a hostile response from some of the EU's new member-states, with the Slovak finance minister, Mr Ivan Miklos, denouncing it as anti-competitive.